Obama Said to Plan Suspension of New U.S. Coal Leases

By:  Jennifer A Dlouhy
Source: Bloomberg

The Obama administration plans to put a moratorium on new coal development on public land while it conducts a broad study of the environmental effects of the U.S. leasing program, according to two people briefed on the plan.

The Interior Department is slated to announce the initiative Friday morning, said the people, who asked not to be identified because the decision hasn’t been formally announced.

It’s the latest move by President Barack Obama to combat climate change and follows a pledge he made in Tuesday’s State of the Union address “to change the way we manage our oil and coal resources, so that they better reflect the costs they impose on taxpayers and our planet.” 

Obama, who has made combating climate change a top priority of his second term, is facing mounting calls from conservationists to thwart new fossil fuel development as part of a “keep it in the ground” movement.

The Interior Department analysis would include an evaluation of how extracting and burning coal affects climate change. Royalty rates, where to allow coal leasing and how to do it more competitively also could be wrapped into the assessment, according to the people.

Federal Land

The plan, reported earlier by Reuters, would have little effect on production from existing leases. By some estimates, existing leases hold enough coal to continue producing for 20 years at current rates of extraction.

About 40 percent of U.S. coal now comes from federal land, much of it from the Powder River Basin in Wyoming and Montana. The Wilderness Society and the Center for American Progress estimated that coal extracted from federal lands in the Powder River Basin accounts for more than 10 percent of all U.S. greenhouse gas emissions.

Environmentalists cheered the move, with billionaire hedge fund manager and clean energy promoter Tom Steyer praising Obama in a statement for “leveling the playing field and ending the fossil fuel industry’s unfair advantage.”

The federal coal leasing program, administered by Interior’s Bureau of Land Management, has come under scrutiny from public interest groups and government investigators, who fault the government for selling coal for less than its full market value. Many government lease sales have had a single bidder.

‘Frozen in Time’

“The federal coal program is frozen in time in the 1980s,” Former Deputy Secretary of the Interior David J. Hayes, said in an e-mailed statement. “The current rules, which were written when you could still smoke on airplanes and dump sewage in the ocean, neither deliver a fair return to taxpayers nor account for the pollution costs that result from coal mining.”

The Government Accountability Office said in 2014 that the bureau was not fully considering future market conditions and potential coal exports in determining the value of its leases. Friends of the Earth, an environmental group, and the Western Organization of Resource Councils, a network of community groups, filed a lawsuit two years ago in a bid to force a comprehensive review of the program, arguing that the last big assessment was in 1979. 

Senator Maria Cantwell, a Democrat from Washington, has pressed the Interior Department to factor the costs of coal’s carbon dioxide emissions into the fossil fuel’s market value. Senator Ed Markey, a Democrat from Massachusetts, has introduced legislation that would halt coal leasing on public lands altogether.

Modernizing Leases

Interior Secretary Sally Jewell said last year it was time to modernize the leasing program to make it more transparent and more competitive, while ensuring taxpayers are getting a fair return from the coal extracted on public lands.

“We’re talking about a program that shortchanged taxpayers more than $30 billion over the last three decades,” Theo Spencer, a senior advocate at the Natural Resources Defense Council, said in a telephone interview. “We need to align the use of our public lands with our obligation to protect future generations from the growing dangers of climate change.”

Coal companies already have been battered by weakening demand, as environmental regulations and lower-cost natural gas entice utilities to shift away from the fossil fuel. Arch Coal Inc., the second-biggest U.S. coal producer, declared bankruptcy on Monday, joining Alpha Natural Resources Inc., Walter Energy Inc. and Patriot Coal Corp.